The use of blockchain has now peaked as industries such as banking, financial services, governance, insurance, media and supply chain management, among others, are now realizing the possibilities of blockchain.
The now widespread use of blockchain applications in some of the world’s most lucrative industries is no ordinary phenomenon.
The creation of blockchain mainly took off in late 2008 or early 2009, after it was created by a person – or a group – using the pseudonym Satoshi Nakamoto. While that may be the case, the blockchain we know today came long before Nakamoto and Bitcoin.
In 1982, David Chaum, then a doctoral student at the University of California, Berkeley, described what became known as the blockchain database in his thesis “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups.”
Whether you support Team Nakamoto or Team Chaum, the use and application of blockchain technology has found itself in a deep position over the past few years, with massive adoption by businesses and, more recently, by consumers.
But while blockchain can now be found in everything from retail, telecommunications, mining and manufacturing, the next phase of its evolution within the global economy has been its introduction to the world. real estate and property management sector.
Blockchain in real estate
For decades, real estate ownership and management operated on a cumbersome and antiquated system that required an endless list of intermediaries that cost buyers, sellers and investors a pretty penny to complete their transactions.
In a recently released MSCI report, the global professionally managed real estate investment market was estimated at over USD 11.4 trillion in 2021, up from USD 10.5 trillion in 2020.
One would think that an industry of this size, which represents a significant portion of global financial assets and transaction activity, would have seen a faster transition to blockchain technology.
Although adoption has been somewhat slow, recent developments have revealed promising and practical solutions that could help revolutionize the way the real estate industry provides greater accessibility and transparency to buyers, sellers and stakeholders.
Increased transaction security
Real estate transactions are notorious for being extremely slow and require deep pockets and a wealth of resources to help complete the transaction. Blockchain-based real estate platforms can help simplify the entire process, from finding a property to eliminating any fraudulent activity that could jeopardize the transaction.
With blockchain, real estate and investment companies can seamlessly scan documents to detect any inaccuracies in an application. Historical data can be tracked and used during ongoing application to help determine if information has been tampered with or misrepresented.
It is estimated that around 1 in 120 mortgage applications in the second half of 2021 contained fraud. By enabling data and transaction details to be stored on a digital ledger, real estate agents and stakeholders will be able to remove the risk factor and create safer, simpler and more affordable methods.
The use of smart contracts
As part of creating a secure and transparent environment for all stakeholders throughout the transaction process, blockchain allows real estate agents, buyers and sellers to use smart contracts to speed up the sales process. or buy.
Having smart switches removes the middleman, saving time and money. With smart contracts, blockchain technology will be able to automate real estate transactions, title searches and escrow services. Additionally, buyers and investors will be able to view historical data regarding the property, such as previous owners, tenants and physical changes made to the property.
Companies that manage rental properties will also be able to check tenant information such as financial statements, employment history and previous tenancy agreements to ensure that applicants comply with specified requirements.
Smart contracts are a simplified way to store important information in a secure digital ledger that allows only stakeholders access to the data and makes it easier for the parties involved to complete real estate transactions.
Tokenize property and real estate
A key element of blockchain technology is the digitization of securities, which in this case is often referred to as tokenization. Through this, certain real-world assets and securities can be tokenized into a digital format, which can then be distributed to investors and transferred to certain counterparties.
By enabling the tokenization of property and real estate, the industry not only allows it to democratize and be accessible to more interested buyers, but also makes digital assets more personalized to meet the needs of investors and consumers.
The tokenization of real estate facilitates the distribution of assets among multiple groups of investors while taking advantage of secondary market opportunities. This means issuance can be completed faster, helping to speed up the negotiation process and managing financial components such as payments or dividends to relevant stakeholders.
Increases property liquidity
The current market turmoil, driven primarily by listing price inflation and soaring interest rates, means that there are not always buyers or sellers available in the market.
Although many people tend to sell cash to the bank in times of economic uncertainty, the use of blockchain could mean that individuals can sell a percentage of their home’s equity in the form of tokens. We have already discussed the tokenization of real estate, and in this case it offers an alternative investment option between a pool of investors.
We are already seeing how blockchain makes the real world more digital and symbolic through the introduction of Web 3.0 functionality. Recently, a house in Columbia, South Carolina was sold for $175,000 to a real estate investor via a non-fungible token (NFT) through a subsidiary of Roofstock Chain.
The sale marked the first NFT-based home sale in the US, requiring multiple layers of blockchain players to complete.
This is a simple example of how real estate, whether commercial or residential, can be digitized and streamlined to help increase equity and attract more investors.
Blockchain technology has proven to be a diverse, versatile and multi-layered addition to the real estate industry that can potentially improve the security, transparency and accessibility of real estate for more investors, buyers and sellers.
Although much development is still needed for more practical and logical integration within the wider real estate industry, it has already proven to be a successful addition to a global industry that sees trillions of dollars in annual transactions of assets moving around the world.
On a smaller scale, real estate agents and real estate companies could implement alternative practices to provide more stable solutions. This would not only improve the transaction process but also enable a more secure and streamlined industry, making real estate a democratized asset globally.
Featured Image Credit: Photo by Karolina Grabowska; pixels; Thanks!
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